The borrowing process, detailed in the video below, was again a smooth and simple experience. But I encountered one major challenge. Lending Club rejected me outright for a loan. When I called and questioned them on this they said that I had too much debt for someone with my income. As I explained in the previous post, I have very little income outside investment income and I do carry a mortgage. So, despite my 815 Transunion credit score I received an “Adverse Action Notice” email giving me the bad news.
A P2P Loan at a 6.03% Rate
Luckily I had a plan B. I really wanted to understand and review the borrowing process at both Prosper and Lending Club so I applied for a loan in my wife’s name. Wouldn’t you know it, she was approved for a loan with an A1 grade and a rate of 6.03%. What was curious is that she had less than half my income (and it is pretty much all investment income – my wife is a part time yoga teacher and a stay at home mom) but no debt whatsoever. The home mortgage is in my name and so, despite a low income, her debt-to-income ratio was just 2.96%. Obviously this number is very important to Lending Club.
The biggest difference between the loan on Prosper (at 31.99%) and the one on Lending Club (6.03%) is the speed at which my loan funded. On Prosper it was less than 24 hours but on Lending Club it took five days. Despite that big difference in funding the money from Lending Club was in my account very quickly – just eight days (six business days) after my application was filled out.
Get Your Interest Rate Quickly
Like Prosper, Lending Club was able to quote an interest rate very quickly. Just two screen and five minutes into the process and I had my interest rate. They also gave me the option to increase of decrease my loan amounts and provided the corresponding monthly payments.
Here is the timeline for my loan application at Lending Club:
Tue 9/13 – Applied for a loan on LendingClub.com
Wed 9/14 – Loan is active on the platform for investors
Thu 9/15 – Lending Club called to verify personal details
Mon 9/19 – Loan fully funded by investors
Tue 9/20 – Loan issued
Wed 9/21 – Money appeared in my bank account
The underwriting algorithm remain a bit of a mystery to me. Obviously the amount of home debt is very important and the amount of income you have less so. But beyond that I really cannot come to any logical conclusions about why I was rejected and my wife obtained a A1 loan.
Regardless of my personal experience the process for obtaining a loan was quick and easy. The total amount of time needed including the phone call was less than 15 minutes. Lending Club kept me informed throughout the process and the money was in my account before they promised.